So much for the spring selling season.
New-home sales fell sharply in March far more than expected, to the lowest level in nearly seventeen years, the papers report.
Sales fell 8.5 percent (seasonally adjusted) from a month earlier, and the inventory of unsold homes—a key indicator of the future health of the market—hit the highest point in twenty-seven years, The New York Times says on C4. Year over year sales plummeted thirty-seven percent, say Bloomberg and The Wall Street Journal, a number the Times should give us but doesn’t. The Commerce Department sharply lowered its February sales number to -5.3 percent from an earlier estimate of -1.8 percent, the Times says.
The bad news doesn’t end there, despite all the rumblings you may have heard recently about the market hitting bottom soon. It would take eleven months to run through the existing inventory at current sales levels (up from 10.2 in February), something the Journal explicitly says means “the bottom of the market doesn’t appear in sight” and Bloomberg says indicates “the housing recession is far from over.”
Prices fell more than thirteen percent from a year ago, the biggest drop in thirty-seven years, say Bloomberg and the Financial Times, and something the NYT says “could discourage prospective buyers from re-entering the market.” That’s a strange statement and perhaps a mistake. Lower prices, or course, make people more likely to buy. At least it had the number, unlike the Journal’s A3 story (cheers to Bloomberg and the FT for having both the price decline and year-over-year sales numbers.)
Down across the board
Sales were down in all the nation’s regions, but in the Northeast they were off an incredible sixty-five percent. Barron’s calls the overall news “perhaps the most alarming yet of the housing recession.” We don’t see anyone report that this number is particularly bad as it comes on top of a twenty-four percent decline a year ago from March 2006, when 1.12 million new homes were sold. Our quick calculation says new home sales have fallen fifty-three percent in two years (to 526,000 last month).
While the sales data are subject to monthly volatility, “this is just gruesome and leaves no other conclusion than that the downturn in the U.S. housing market is still in full swing,” ING Bank economist Dimitry Fleming wrote in a research note.
The WSJ’s report says the housing data, along with durable-goods orders, signal that the economic downturn may be “lengthy,” albeit with positive but anemic growth. Durable goods orders edged down 0.3 percent in March, but were up 1.2 percent excluding defense and transportation, signaling some strength in parts of the economy.
An unemployment surprise
Offsetting the bad housing news somewhat, unemployment took a tumble last week, falling to 342,000 new claims from 375,000, something Bloomberg says was unexpected.
Businesses are trying to assess how deep the downturn may be before they fire additional workers, and some firms are retaining employees to fill a surge in export orders. Still, lower home values, higher fuel bills and fewer jobs make it more likely consumers will restrain their spending, which accounts for two-thirds of the economy.
Economists expect the U.S. to shed 70,000 jobs in April, the WSJ says.
Adding insult to injury in home land, the Journal says local governments are raising property taxes to make up for budget shortfalls.
Uncle Ben’s converted loans
The WSJ says on A3 that Wall Street borrowed less from the Fed’s new direct-lending program for investment banks, but commercial banks borrowed “sharply” more, something Bloomberg calls a “sign of persisting funding strains in money markets.” The average borrowed every day was the highest since the 9/11 attacks.
FAA in the tank
The NYT and WSJ report that the Federal Aviation Administration covered up a “series” of near-misses caused by Dallas air-traffic controllers, who blamed their mistakes on pilots. The news comes even though the Dallas area had already been caught doing similar things several years earlier.